Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nigeria, 1981- 2015

Effect of exchange rate volatility on industrial productivity has been a controversial debate among academia and experts. This study examines effect of exchange rate volatility on industrial productivity, many studies have mixed results on the direction of exchange rate volatility and the scope of the thesis covers 35years , the pre-and post-Structural Adjustment Programme while primary and secondary data gathered from the Nigeria industrial sector by questionnaire and time series obtained from the Central Bank of Nigeria statistical bulletin, 2014/2016 were used. The data were estimated using descriptive statistical methods: chi-square and mean scores and Phillip Perron and Augmented Dickey Fuller used to determine the unit roots and non-stationarity among the variables. ARDL and Bound test was applied to determine short and long run co-integration among independent and dependent variables. Diagnostic and Normality test applied to test for stability. The Fstatistics is 159.3 and the R-squared is 99.7 shown that variables are jointly significant and model a good fit. The Durbin Watson of 3.04 showed no serial correlation. The results shown that foreign exchange rate has a positive relationship with industrial performance, however, the exchange rate volatility crumbled industrial production as machinery and raw materials are imported for the industry productions, while bank lending rates, FDT, Inflation and PCI have negative coefficient. The ADRL and Bound test revealed a long run relationship among the variables at 5% significance level. The government should pursue currency appreciation as exporter of mono product and encourages non-oil exports and discourage Nigerian cosmopolitan pattern of consumptions.